VW Could Close German Factories for First Time in Its History

Volkswagen Group is considering closing two manufacturing plants in Dresden and Osnabruck. These two factories build the VW ID.3, VW T-Roc Cabriolet, and both versions of the Porsche 718. VW Group EV sales are down over 15 percent in Europe and the US through the first half of 2024.

The 2020s haven't been easy for automakers. Now, Volkswagen Group is considering some drastic steps to cut costs. The German-based conglomerate is reportedly mulling two plant closures in its home country—something that hasn't happened since the company's pre-World War II founding in 1937.

Facilities in Dresden and Osnabruck are currently being investigated as candidates for closure, according to Autocar. In Osnabruck, the sprawling factory currently builds the Porsche 718 Boxster and Cayman, vehicles that will soon be out of production. However, the 105-acre facility also builds the Volkswagen T-Roc Cabriolet, Europe's most popular mainstream convertible. That said, it's still a niche vehicle, with 6,110 sales through the first half of 2024. The factory in Dresden, widely known as the Transparent Factory, is considerably smaller. It opened in 2002 to build the Phaeton and currently builds the ID.3.

In addition to closures, the company's job security program is also under scrutiny. Established in 1994, it was designed to prevent job cuts through 2029. As you might imagine, the German-based trade union IG Metall isn't happy about any of this. Volkswagen brand CEO Thomas Schafer told German media that the situation was "extremely tense and cannot be overcome by simple cost-cutting measures."

Curiously, the news comes as VW Group reports largely positive sales numbers through the first half of 2024. The European market is up 1.9 percent from 2023, while US sales for the group were up 3.0 percent. Things in South America were even better at 15.4 percent, but in Asia, the group recorded a drop of 8.2 percent.

The larger story here could be uncertainty in the EV market. Sales for many brands have cooled just as plans for electric expansion kicked in, and VW Group—which is betting big on an all-electric future—is struggling. Through the first half of 2024, the company reported a 15.2-percent drop in EV sales for Europe and 15.4 percent drop in the US.